Balancing the Books: Per-pupil spending higher than it's ever been

Taxpayers might be surprised to learn, especially if they listen to school officials, that in 2011 they provided Michigan's public schools with more money per student than ever before.

New data from the Michigan Department of Education (and available through the Mackinac Center's website) show that in 2011 taxpayers supplied schools with $19.5 billion, or about $13,400 per student after taking into account all local, state and federal sources of revenue.

In inflation-adjusted terms, this is slightly less than schools received on average in recent years. By that measure, the most schools received was $13,800 per student in 2002. Nevertheless, last year taxpayers supplied public schools with 38 percent more per student, even after adjusting for inflation, than they did in 1988, the first year for which these data are available.

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The average revenue per student in 2011 for all 28 school districts in Oakland County was $12,993. Bloomfield Hills received the most of all these districts -- $17,730 -- 32 percent more than the state average, while Brandon got the least -- $10,384 -- 23 percent less than the state average.

Despite receiving more money (or about the same in inflation-adjusted terms), an increasing number of school districts are running budget deficits. This illuminates an important point: When school districts face fiscal problems, it's most often a problem of overspending, not insufficient funds. For instance, the 41 districts with deficits in 2011 spent 22 percent more per student on average -- $14,142 -- than the statewide per-pupil average of $11,561.

The Pontiac school district is a prime example of a district with a spending problem. In 2011, the district received $14,125, but spent $16,381 per pupil -- the fourth highest in the state among comparable districts. With fiscal habits like these, it's no surprise the district has a $24.5 million budget deficit.

Pontiac wasn't alone in spending more than it took in -- Bloomfield Hills, Farmington, Hazel Park and Clawson all did the same in 2011. Bloomfield Hills spent the most of any Oakland County school district -- $18,059 per pupil -- and more than double the lowest spending district (South Lyon).

The largest single expenditure in these districts is employee compensation -- consuming on average 76 percent of spending in 2011. Mackinac Center adjunct scholar Andrew Coulson recently noted that public school employment nationwide has grown 11 times faster than enrollment since 1970. But in many ways compensation is the most difficult cost to reduce.

Most spending on employees is dictated by union contracts that lock in increasing costs for school districts. Even if the district forgoes handing out across-the-board pay increases to employees, for example, many of them get pay bumps through annual salary "step increases," which are based solely on years on the job.

Benefits consume a growing portion of employee compensation costs, and most of these are tied up in union contracts as well. Last year, Oakland County districts devoted 26 percent of spending to employee benefits, or about $3,078 per student. Statewide, per-pupil spending on employee benefits rose 2 percent on average over the last year.

Some of the increased costs are a result of the growing burden the state-run school employee pension system creates for districts. The blame for this rests at the feet of previous state elected officials and pension bureaucrats who perennially underfunded the system. The state has only saved 65 cents for every dollar that's been earned in pension benefits by school employees. School districts are now charged 12.5 percent of payroll to make up for previous legislatures' unwillingness to pay the full cost of the promises they made.

The 20 charter public schools in Oakland County -- almost none of which use unionized employees or participate in the state pension system -- spent significantly less on average per student than the county's conventional districts: $9,223 per student, or 29 percent less than the district average. The lowest spender among these schools was Holly Academy at $7,521 per student. The same trend holds statewide: Charters averaged spending $9,979 per pupil, 17 percent less than the overall statewide average.

The current Legislature enacted several bills last year that should help school districts rein in costs. For instance, districts that don't require employees to pay at least 20 percent of their health insurance premiums will be capped on how much they can spend on insurance. These caps are still about 50 percent higher than what Michigan private-sector employers pay for health insurance premiums on average, but it's a start.

As this most recent fiscal data suggests, inadequate funding is not the issue. School officials and the Legislature need to work to control costs. If they don't, then they alone are responsible for any cuts they make to educational services.

Michael Van Beek is director of education policy at the Mackinac Center for Public Policy, a research and education institute headquartered in Midland.